Chandramouli v Wallader

REASONS FOR JUDGMENT 1 The applicant applies under O 77 r 8 of the Federal Court Rules to set aside a sequestration order which was made against her on 20 December 2000. The sequestration order was made on the ground of non-compliance with a bankruptcy notice. There was first a notice issued on 1 September 2000 which was based on a judgment debt in the Queensland Magistrates Court for $21,389.35. In the schedule that amount appears as the amount of the judgment or order. Then in item 4, the subtotal, the same amount appears. Then in item 5, "payments made and/or credits allowed since the date of judgement or order", the same amount appears again, and, finally, the total debt owing is also shown in the same amount. Thus, on its face, the notice shows an amount of the judgment or order, payments made to the full amount of that judgment or order, and yet a total debt owing of the same amount. 2 The bankruptcy notice was apparently given to the applicant's husband and received by her on 10 September 2000. The petition was presented on 21 November 2000 and, as initially presented, alleged a failure to comply on or about 2 October 2000 with the requirements of a bankruptcy notice served on the applicant on 10 September 2000. However, it seems that the petitioning creditor accepted that there were problems, either with service of the notice or because of the form of the notice for reasons to which I have already referred, or perhaps both. So service (accepted to be proper service) of the notice was effected on the applicant on 27 October. 3 It is clear from the copy of the petition subsequently served on the applicant that it was this second service of the notice that was relied on. The petition was amended to allege non-compliance on or before 17 November 2000 with a bankruptcy notice served on 27 October 2000. However, when the bankruptcy notice was served on 27 October 2000, it was materially different in that the figure opposite item 5 in the schedule had been blocked out. It is not suggested that the notice was re-issued by the Official Receiver, or amended with the Official Receiver's authority. 4 Accordingly, following my decision in Circle Credit Co-op Ltd v Lilikakis (2000) 99 FCR 592 at [18], I find that this was not a bankruptcy notice within the meaning of the Act. It is therefore not necessary to deal with the second issue raised by the applicant, that is, that there is no debt owing and that I should go behind the judgment. 5 Counsel for the first respondent, the petitioning creditor, argued that as a matter of discretion I should not set aside the sequestration order. Counsel argued that the applicant had not taken adequate steps to protect her own interest. She had not defended the action in the Magistrates Court and had not appeared on the hearing of the petition. However, for the reasons discussed by the Full Court in Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915 at [39-43] courts have traditionally treated the requirements of sequestration as something to be proved strictly, and I see no reason to depart from that principle in the present case. For the same reason, I would reject the first respondent's submission that his client should be awarded costs. On the contrary, the applicant has succeeded, and in the ordinary course costs should follow the event, and there will be an order that the respondent pay the applicant's costs. 6 The position as to the Trustee, who was a party to the application, as he should have been, and was represented by counsel, is that he does not oppose the proposal to support the setting aside of the order but seeks to bring matters to the Court's attention. 7 In an affidavit sworn on 20 March 2001, he says that despite several requests by him to the bankrupt she failed to deliver any statement of affairs. She did meet with the Trustee on 1 February 2001 and simply said to him that she claimed not to be indebted to either the petitioning creditor or any other person who had advanced money to her husband. She gave him details about her employment but she failed to complete any questionnaires that he sent her. He has been contacted by three other persons claiming to be creditors, one of whom has withdrawn. Two remain: one for $21,000 and the other for $5500. The Trustee has not called for any formal proofs of debt. He says the estate is presently impecunious. He has incurred out-of-pocket expenses and professional costs in administering this estate. The applicant has not surrendered her passport to him despite his request. 8 I think, in the circumstance, it is reasonable that there be an order, as the Trustee submits, that his costs of administration should be paid and his legal costs in connection with the present proceeding be paid. As to who should pay them, I think it is appropriate that the applicant pay them. To the extent that the Trustee has incurred expenses, they appear to be, to a substantial degree, caused by the applicant's failure to comply with her obligations while a sequestration order was in existence. This is something for which the first respondent, the petitioning creditor, cannot be blamed. Accordingly I order that: (1) The sequestration order made on 20 December 2000 be set aside. (2) That the first respondent pay the costs of the applicant. (3) That the applicant pay the Trustee's costs of the application and costs of administration. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.